Prime Minister Julia Gillard has been accused of hypocrisy and compared to a cane toad after she told the states to lower electricity prices, or else.

Speaking at the Energy Policy Institute in Sydney on Tuesday afternoon, Ms Gillard said skyrocketing power prices were hurting households and businesses.

"I want to say very clearly, the last four years' price rises cannot continue," she said.

"[There have been] fifty per cent price increases in many states over four years linked to demonstrable inefficiencies in resource allocation in the market; or in this state, New South Wales, nearly 70 per cent increases.

We won't lightly use the big stick of regulation... but it's a stick we hold and which we'll use if required.

Julia Gillard

"Some states, like New South Wales and Queensland, are doing very well out of this financially and their revenue from some electricity assets is growing much faster than in the private sector."

She challenged the states to come up with ways of reducing power prices, and says if the premiers won't act, she will do it for them.

"We won't lightly use the big stick of regulation, of stronger powers for the Energy Regulator and the ACCC, but it's a stick we hold and which we'll use if required," she said.

Ms Gillard has already written to state leaders, asking them to come up with solutions by the end of the year.

'Deflecting criticism'

The Victorian Government was quick to respond, saying it gets no revenue because the electricity market has been privatised.